MSG Team's other articles

11060 Role of Attitude in Employee Relationship

The performance of an individual is largely dependent on the relation he/she shares with his/her colleagues. It is really important that individuals are friendly with their colleagues so that they can discuss several issues with each other and come to a conclusion best suited to all. No individual can perform alone. Tasks are accomplished at […]

9671 How Silicon Valley Firms are Implementing Innovative Human Resources Policies

In recent years, many Information Technology and Software firms in the Silicon Valley area have been implementing innovative Human Resources (HR) policies that are aimed at creating an engaging workplace culture and actualizing a work environment that is fulfilling and rewarding. Starting with flexible work and employment arrangements and including, among other measures such as […]

9136 Employee Engagement and Employee Retention

Individuals coming together on a common platform to achieve the goals of the organization as well as to earn a living for themselves are called as employees. The smooth functioning of an organization depends on its employees and their seriousness towards work. What is employee engagement? Employee engagement refers to a situation where all the […]

9626 How the HR Scorecard can Help Gig Economy Firms to Manage Freelancers Better

How the HR Scorecard Helps Gig Economy Firms It is usually thought and understood that the HR Scorecard is useful to only those firms in the manufacturing and services sectors. However, there are uses for the HR Scorecard in the Gig Economy or the Freelancing Economy firms as well. These relate to how such firms […]

9272 Factors Affecting Compensation from Employer’s Perspective

In the previous sections, we looked at the components of the compensation and how each is used to assess the relative importance of an employee as far as remuneration is concerned. In this article, we look at some of the factors that determine how much compensation is to be paid out to the employee by […]

Search with tags

  • No tags available.

Compensation system involves the total rewards that are given to the employees for the labour and services they provide to the organization. Compensation includes direct monetary benefits as well as indirect monetary benefits.

Wages and salaries form the direct financial benefits that an employee receives from his or her company. Besides, wages and salaries, bonuses and commissions also form a part of the direct monetary benefits. The indirect monetary benefits include paid absences and other leave benefits, retirement plans, employee insurance schemes, health plans, education benefits and other such benefits.

A well-defined and balanced compensation system gives the organization an advantage of maintaining internal as well as external equity. It is a powerful tool for attracting employees, motivating them to work in achieving the strategic organizational goals, and retaining them in the long run. An HR Consulting Firm can provide an in depth analysis and detailed report on the setting up of a balanced compensation system for the company.

An organization need to have a clear compensation philosophy which is in line with the strategic goals, objectives and culture of the organization. Based on the compensation philosophy of the company, the various components of compensation are designed and chalked down in detail.

The development of compensation philosophy includes the study of various aspects viz:

  • Impact of compensation strategy in promoting organizational success

  • Organization’s stand in considering the compensation provided as a tool in attracting and/or retaining employees

  • Does the organization intend to lead/lag/match the compensation market for the given geographic area and in the concerned industrial sector?

  • How does the organization aims at maintaining internal and/or external equity?

  • How is the employee’s performance linked in relation to wage or salary increases?

  • Following the legal formalities, rules and regulations of the land

Compensation detailing comprises of identifying positions and setting up of wage or salary specifications against each of the position. Also, incentive packages and bonuses, if any, are clearly defined for each of the position while describing the compensation related details.

Compensation detailing may involve execution of following activities depending upon the requirements of the organization:

  1. Designing pay scale

  2. Defining bonus and incentive plans

  3. Performing salary surveys

  4. Examining the requirement for wage/salary changes or increase

  5. Defining guidelines for change/increase in wage/salary

  6. Elaborate preparation of compensation policy and compensation strategy

A compensation study carried out in an organization generally involves following important elements:

  • Analyzing the current situation and requirements of the organization

  • Conducting salary/wage surveys and interviews within the organization

  • Studying the various positions or jobs as existing in the organization

  • Restructuring and redefining the positions, according to needs

  • Defining the internal worth of the different positions in the organization

  • Ranking the various positions and jobs in the company

  • Evaluating the existing base compensation plan of the organization

  • Identifying and evaluating the market pay structures

  • Revising the base compensation plan in the organization

  • Matching the changed compensation package with the current fiscal resources of the organization

  • Comprehending the impact of pay revisions

  • Laying down the guidelines for revised pay administration

  • Preparing an elaborate report on the compensation studies to be submitted to the top management

Depending upon the requirements of the company, the HR Consulting Firm may take up the necessary aspects required to be considered for development and/or improvement of the compensation system in the organization, thereby, strengthening the compensation system of the company by making it more equitable and attractive.

Article Written by

MSG Team

An insightful writer passionate about sharing expertise, trends, and tips, dedicated to inspiring and informing readers through engaging and thoughtful content.

Leave a reply

Your email address will not be published. Required fields are marked *

Related Articles

Corporate Strategies to beat the Downturn: Cutting Slack and Layoffs

MSG Team

Compensation and the IT Sector

MSG Team

Compensation Management and Globalization

MSG Team